Property funds report green performance en masse as asset owner initiative gathers steam

Survey covers assets now worth $1trillion.

Hundreds of global property funds and companies with real estate assets of nearly US$1 trillion have this year disclosed data on how green their portfolios are to an asset-owner launched initiative that is fast becoming the reference benchmark for environmental reporting to investors. Over 340 – a 60% rise on 2010 – answered this year’s survey by The Global Real Estate Sustainability Benchmark (GRESB) Foundation, which is being pushed by asset owners representing US$1.7 trillion in institutional capital. The findings of the survey were unveiled today at one of the property industry’s biggest gatherings, the European Public Real Estate (EPRA) conference in London. GRESB was kicked off in 2010 by three of the largest European institutional investors, Dutch pension management giants APG and PGGM and the Universities Superannuation Scheme in the UK. The three clubbed together to set up a global benchmark of the greenest listed property management companies to gee up poor reporting levels in the sector. The index creation came after a 2010 survey of 688 property managers – of which 198 responded – commissioned by the funds and carried out by the European Centre for Corporate Engagement (ECCE) at Maastricht University, revealed a “strikingly low”number able to provide meaningful data on environmental factors. The survey found that just 19% of respondents could report verified numbers on energy consumption of their buildings, while only 16% could do the same for water consumption and just 14% for carbon emissions. GRESB has since attracted support from other global pension funds including ATP Real Estate in Denmark, Australian Super and Local Government Super from Australia, MN Services, the Dutch pension fund manager, and the Ontario Teachers Pension Fund in Canada. The foundation receives input from leading academics and is supported by two of the biggest real estate associations for publicly-listed property funds, Amsterdam-based, EPRA, and the National Association of Real Estate Investment Trusts (NAREIT) in the US. The science-based, sustainability benchmark for commercial property portfolios aims to act as a engagement tool with which institutional investors can discuss social and environmental issues with their property managers. Managers with best practice environmental reporting and energy reduction programmes are awarded a green star label. Responses to the 2011 survey have jumped as asset owners have backed the benchmark. This year’s report breaks down
the best performers in global regions. Australia’s property funds lead the pack, with notable performers including a couple of funds from Colonial First State Global Asset Management. The global real estate sector is estimated to be responsible for 40% of global carbon emissions, and the buildings owned and operated by property funds account for a substantial share of these emissions. Investors say that property portfolios are increasingly at risk from government action on energy ratings, carbon taxes and news sustainable building codes, but that buildings can also save money and reduce energy consumption. There is also some evidence of a green premium for tenancy rates and sales values in environmentally friendly buildings. Respondents to this year’s GRESB survey revealed they used energy worth US$5bn in 2010, or the equivalent of about 34 million tons in estimated carbon emissions. On average, the funds consumed one percent less energy in 2010 compared to the year before, with Europe trailing Australia and the US. “Green Star” environmental leader funds reducedenergy consumption by as much as three percent. However, Nils Kok, Executive Director of the GRESB Foundation, said there was still a long way to go: “More efficient use of energy and other resources by the real estate sector can structurally reduce energy demand. But the data shows that the most fund managers in the commercial property sector are just at the beginning of full integration of environmental management in daily operations. Reporting on energy, carbon, water and waste is still not common.” Angelien Kemna, CIO at APG Asset Management, said: “The data provided by the GRESB Foundation now forms an integral part of APG’s investment process, assisting us in the due diligence process of new real estate investments and in engaging with our existing property investments. Ultimately, this should reduce the environmental impact of APG’s real estate investments and improve the financial risk-return profile of our investments. The ever louder demands from policymakers to reduce emissions will increasingly affect the way the property sector operates.”
Link to report